Sunday, July 14, 2013

Spectacular: Lake Wobegonomics Research from the New School

This is from the New York Times.  It was written by Teresa Ghilarducci, the Bernard L. and Irene Schwartz chair of economic policy analysis at the New School for Social Research

Six months ago, I visited North Carolina's state treasurer, Janet Cowell – the only Democrat in the administration now – and met with citizen advocates.. Our trip had impact, on us at least. On the plane coming home my colleague turned to me shell shocked, "How can it be legal to have so much poverty in such a wealthy state?" 

Ask two questions: How rich is the state? And what percentage of its children live in poverty? That's a working definition of good fiscal policy…. Let’s look at North Carolina. It is the 39th richest state, and yet it ranks 12th for the percentage of children living in poverty – only 11 states fare worse. 

Um, ma’am….if it is the 39th richest state, that means it's the 12th poorest state.  That means there are 11 states that are poorer. And if it is the 12th for percentage of children living in poverty….then again there are 11 states that are poorer. It’s exactly the same proportion, not out of line at all.  What's with this "And yet..." thing you got going?

Perhaps you believe that ALL of the states should have fewer children in poverty than adults in poverty, as a percentage, COMPARED TO OTHER STATES, but I’m a trained economist and I can assure you that averages don’t actually work that way. If some states rank higher for child poverty than overall wealth, then some state will rank lower. It’s just the way numbers work.

So, on to your question, "How can it be legal to have so much poverty in such a wealthy state?" 
(And putting aside the fact that NC has exactly as much poverty as our wealth would suggest).
That "illegal poverty" thing you bring up seems like a pretty radical solution.  I mean, we could make it illegal, and arrest poor people, or shoot them.  But I think that's a terrible idea.  Here's the thing: in any group of states, unless they are all identical, won't it be true that some are richer than others?  If you have a purely relative measure of poverty, then it will always be true that half the states are poor, because they are below median income.  We could increase income by 10 times, across the board, and half the people would still be below the median. 

Of course, this is fine, given that your answer to the question, "How much money should we give away?" is simply, "More."  It could never be enough.  And that's why those relative measures of poverty are so useful.  What has your knickers knotted, ma'am, is not poverty. It's inequality.  Let me assure that that is quite a different problem.  Most real solutions to poverty actually increase inequality.  Likewise, most solutions to inequality sharply increase objective (not relative) poverty.

I wanted to check to see where she got her PhD, because it had to be Berkeley.  Yup... Berkeley.

A kind reader suggested this is an appropriate illustration.

Nod to Joel R., for sending me the NYTimes piece in the first place.

14 comments:

Anonymous said...

Oh, she is a government union organizer! I thought she was a real economist. ;)

Simon Spero said...

Jane Fonda on the screen today
Convinced the Liberals it's ok.

Ken said...

I was under the impression there would be no math.

Gerardo said...

Mungowitz is clearly Old School

Kevin Erdmann said...

Well, to give her credit, in the last paragraph, she mentions that West Virginia is great for poor people because they raised taxes to pump up public employee retirement benefits. I mean, if there is one thing the poor have been clamoring for, this is it.

And California is great for poor people because they have the good sense to propose taking 15.5% of poor folk's income instead of the 12.5% everyone else takes, to give back at the state's discretion, because, let's face it, who's going to trust THEM to do something useful with it. I mean, nobody has more sympathy and love for the poor than Teresa and I, but, come on. I mean, the less discretion they have with their own money, the better. 'm I right?

These are standard pieces of the revolution, going back to well before Marx. She's on very firm ground here, mathematics notwithstanding.

Tom said...

Thanks to Kevin Erdmann for two words of comedic gold... "mathematics notwithstanding".

Pesky math.

Tom said...

Uh, oh. Bad math and weak on the facts...

"Six months ago, I visited North Carolina's state treasurer, Janet Cowell – the only Democrat in the administration now...'

The Superintendent of Public Instruction is June Atkinson, a Democrat.

Jim Hu said...

if you're 39th, then there are 19 below you.

Rob said...

She reminds me of that fraud Robert Reich, a "political economist", i.e. a polemicist who has excused himself from empiricism.

Anonymous said...

Wait...57 states minus 39th richest...

Is my math wrong?

Dave said...

The largest paper in Utah once ran this breaking headline: "Half of Utah Babies Below Average Birth Weight". I believe the concept of average is no longer taught in school.

Anonymous said...

Best comment I've seen anywhere all day. Well done, well done.

Fred said...

Re: Dave "The largest paper in Utah once ran this breaking headline: 'Half of Utah Babies Below Average Birth Weight.' I believe the concept of average is no longer taught in school."

It depends on your definition of average. Is average a single value (it can be) or is it a range of values (it can be)? Clinically (meaning in medical and related fields), average is often given as a range (typically within 1 standard deviation of the mean of a distribution). Thus, for example, let's say the mean (average) weight of a baby at 7.5 lbs (average, at least in 1996, was actually 7.44 lbs). Let's also say the standard deviation of weights is 1 lb. Using typical "average" clinical cut-off scores, this puts 68% of babies between the weights of 6.5 and 8.5 lbs. at birth (again, those weights are made up).

So 68% are "average" weight. This means that you'd only expect 16% of babies to be below average weight (and 16% above average) so to have 50% below average is at least noteworthy and potentially concerning.

As another example, look at IQ scores. An average score is 100 but with a standard deviation of 10, scores between 90 and 110 are labelled as "average". So 68% of the population have average intelligence with 16% below average and 16% above average.

For that article you referenced, I'm not sure if they actually used average like this but I'm assuming that the research or statistics cited used a clinical definition of average.

In any case, Utah has lower rates of low birth weight than the country on average so I'd be interested in your source of that article.

Benson said...

"Here's the thing: in any group of states, unless they are all identical, won't it be true that some are richer than others? If you have a purely relative measure of poverty, then it will always be true that half the states are poor, because they are below median income." Did the writer say that they were using such a crazy measure of poverty? I don't think any serious discussion of poverty uses such a definition. Poverty has to have a relative component, as Adam Smith observed, but it is more like "cannot afford the things considered basic in the society" and not "in the bottom 10% of income" or something like that.